By Chris Sevcik, Director of International Trade Services, WTCGP

The African Continental Free Trade Agreement (AfCFTA) now includes 54 of Africa’s 55 states and creates a $3.4 trillion economic zone of 1.3 billion people.  The AfCFTA allows for free movement of investments, business travels and creates a customs union to attract long-term investments and streamline trade.  

The goal of the AfCFTA is to increase international trade, but moreover expand intra-African trade.  Currently much of African trade must flow from a domestic African country to Europe or the Middle East and then back to an African Country rather than directly moving within the continent.  The challenges of transporting goods across boarders consumes an abundant amount of time and resources.  One prominent businessman in Philadelphia commented that it is cheaper and faster to ship products from China to Philadelphia than it is to ship products from Nigeria to Sierra Leon.  

By Chris Sevcik, Director of International Trade Services, WTCGP

The RCEP is a free-trade pact among 16 countries: the ten ASEAN members and India, China, Australia, New Zealand, Japan and South Korea.  RCEP member states make up almost half of the world’s population at 3.4 billion people and their combined GDPs account for about 39% of total global GDP at 49.5 trillion dollars.  The region includes some of the fastest growing economies in the world, and as they continue to grow, it is projected that the region’s GDP will be 250 trillion dollars by 2050.  

The RCEP is not finalized. Currently India has reservations on joining the RCEP. In the past, some citizens in India perceived that some of their prior trade deals were not ideal for India and the current government is keen on ensuring that this perception is not mirrored this time.  Members of the RCEP would like to see India join as they are one of the largest economies in the region and are poised to be a major growth area for years to come.  Regardless of India’s involvement, other RCEP member states have expressed that they are ready to move forward with or without India’s involvement. India understands the benefits that this trade deal could bring to their economy and they are cautiously moving forward; however, they are acting as a stronger negotiator in this new deal.  

China needs better access to Indian markets more than India needs access to China markets. India is standing its ground and not offering many concessional tariff lines to China in order to try and stem an onslaught of Chinese duty-free goods.  While this may work today, factories have been moving from China to Southeast Asia and have recently increased due to the US-China trade dispute. These factories will have preferential trade agreements with India and this may serve as a backdoor for Chinese goods in the future.  The rules of origin will be an area of contention as negotiations continue.

The RCEP has been described as China’s answer to the Trans-Pacific Partnership, TPP. The TPP was led by US efforts while the RCEP is led by China and the plans outline the different leading countries’ stances. The TPP was more ambitious and included regulations on labor, intellectual property and state-owned companies in addition to providing market access for goods and services. The RCEP does not address issues such as regulations on labor, intellectual property or state-owned companies and focuses more narrowly on standardizing tariffs in the region while improving marketing access for services and investment.  

The RCEP should increase regional trade when complete. There are issues with the plan currently and India is working on ensuring that their interests are upheld in the final agreement. When the agreement is finalized, this new trading block will represent the largest and fastest growing countries and region in the world. Understanding this agreement will better ensure companies of their future success.  

By Chris Sevcik, Director of International Trade Services, WTCGP

​The US and China recently signed a limited trade deal addressing US farm goods, Japanese machine tools and digital trade. The limited trade deal is meant to mirror the Trans Pacific Partnership (TPP), and according to a senior administration official, “help producers keep pace with foreign competitors who are increasing sales in Japan now that the 11-nation TPP is in effect, without the US.”  

The new US-Japan trade deal is designated as limited since it does not address automotive tariffs.  The United States had threatened to enact Section 232 of the Trade Expansion Act of 1962 that would allow the US to place tariffs on autos in the name of national security.  With the limited trade deal, Japan trusts that the US will not pursue the tariffs so long as the agreement is faithfully implemented by Japan.

The current limited trade agreement will reduce or eliminate tariffs on US cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products and tomato paste.  The agreement will also prohibit customs duties on digitally transmitted music, software and videos.  

The limited trade agreement is only the first phase of a more comprehensive agreement, according to the Trump administration.  “In the fairly near future, we are going to be having a lot more, very comprehensive deals, signed with Japan,” President Trump remarked.  US Trade Representative, Robert Lighthizer, explains that the US and Japan were expected to meet next April for the next round of negotiations and both sides will revisit the issue of automotive tariffs at that time. 

The US-Japan trade agreement, initiated over a year ago, had run into issues earlier in the week when Japan wanted assurance that President Trump would not initiate Section 232 tariffs.  While the United States did not expressly say that they would not initiate the tariffs, it is understood that as long as both parties faithfully implement the limited trade deal, Section 232 tariffs will not be imposed.